Thomson Reuters has released a Checkpoint report on the new federal tax deduction for qualified business income, commonly known as the pass-through deduction, to help tax and accounting professionals understand its nuances and consider its implications for their clients.
The new Code Sec. 199A deduction, which is available for noncorporate taxpayers, is generally 20% of a taxpayer’s qualified business income from partnerships, S corporations or sole proprietorships; that is, the net amount of items of income, gain, deduction and loss with respect to the entity trades or businesses. It is effective for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026.
The report, Qualified Business Income (Pass-Through) Deduction Under the Tax Cuts and Jobs Act, explains the deduction’s various limitations, phaseouts, thresholds, and special definitions. It describes how to calculate the deduction, specifies the items that are included in qualified business income, and provides examples of specified service trades or businesses that are excluded from the deduction.
“This tax season magnifies expectations for tax and accounting professionals to accurately and expediently guide their clients through the intricacies of the new tax law,” said Salim Sunderji, managing director, Checkpoint, with the Tax & Accounting business of Thomson Reuters. “The pass-through deduction, in particular, promises to have a significant impact and this new report will provide a strong starting point for practitioners to grasp the key intricacies and considerations.”
Also as it relates to the deduction, the report addresses combined qualified business income, the wage and qualified property limitation and its corresponding threshold amount exception, and partnerships and S corporations.
Relevant observations and examples depicting various scenarios are provided throughout the report, and additional resources are suggested for further learning.
To download the special report, visit here.
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